Unicellular organisms as well as the cells of higher organisms utilize low molecular weight polypeptides as extracellular signals that regulate cell differentiation and specialization. Spore- forming bacteria of the genus Bacillus are known to produce a number of peptides which possess antimicrobial activity. More recently, evidence has emerged which implicates these peptides as regulators of sporulation and competence development. Surfactin is a cyclic lipopeptide and powerful biosurfactant produced by B. subtilis. Genes required for surfactin production have been identified and isolated. These include the srfA operon, which encodes at least one of the enzymes involved in the synthesis of surfactin. Genetic evidence has shown that srfA is also required for competence development and efficient sporulation, which suggests that peptides synthesized by the srfA enzymes may function in developmental processes. Transcription of srfA is activated in stationary phase cells and is repressed by readily metabolized carbon and nitrogen sources. Production of surfactin also requires the comA gene, a putative transcriptional regulator of competence gene and srfA transcription. The sfp gene is also required for surfactin production, but its primary function of is unknown. The goals of the experiments described herein is to identify and characterize the products of the srfA and sfp genes, and to elucidate the mechanisms of srfA transcriptional regulation. Genes that require srfA for their expression will also be identified in order to begin to examine the role of srfA in Bacillus development.